roblem 5.27: A remotely located air sampling station can be powered by solar cel
ID: 1712433 • Letter: R
Question
roblem 5.27: A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $12,600 to install and wil have a useful life of 4 years with no salvage value. Ann costs for inspection, cleaning, etc. are expected to be S1400. A new power line will cost $11,000 to install, with power costs expected to be $800 per year. Since the air sampling project will end in 4 years, the salvage value of the line is considered to be zero. At an interest rate of 10% per year which alternative should be selected on the basis of a future worth analysis? ualExplanation / Answer
1.cost of the air sampling station by using sollar cells:
cost of installation for solar cell = $12,600
useful life is 4 years with no salvage value i.e., no money is returned back after useful life.
Annual cost for inspection and cleaning per year = $1400
so,for 4 years the maintainance cost = 4*1400 = $5600
Total cost of the project for 4 years by using sollar cells = 12600+5600 = $18,200
Cost of the project for first year = 12600+1400 = $14,000
2.Cost of the air sampling station by using powerline :
Cost of installation for new power line = $11,000
Useful life is 4 years with no salvage value
Power cost used for the project per year = $800
So,total power cost for 4 years = 4*800 = $3200
Total cost of the air sampling station using powerline = 11000+3200 = $14,200
Cost of the project using power line for first year = 11000+800 = $ 11,800.
CONCLUSION:
With the 10% intrest rate for the project cost,the method using new power line installation is cheaper than the sollar cell installation method because the cost of project using powerline is cheaper than the sollar cell method i.e., $14,200<$18,200.
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